Wealthy Look to US for Real Estate

August 20 2008 - Rich Koreans are turning their eyes to the U.S. property market and investing more money in the purchase of land and homes there to capitalize on the slump in the world’s biggest property market.

According to a report released Wednesday by the Ministry of Strategy and Finance, Koreans purchased a total of 67 properties in the U.S. market in July, up from 47 a month ago. The figure stood at 34 in May and 39 in April

The July purchases were valued at $34 million, continuing an upward trend for the fourth consecutive month. Koreans invested $25 million in June, $20 million in May and $18 million in April in the market.

Market experts said that investment in the U.S. market increased over the past few months, as many rich Koreans purchased U.S. properties, betting that the U.S. market will bottom out sooner or later. They also cited growing uncertainties in the domestic property market as another trigger for the increase.

“With the U.S. property market falling following the U.S. subprime mortgage meltdown, many rich Koreans have paid attention to the development of the U.S. property market,” said Hong Eun-hee, a manager at Rootiz Korea, an overseas property investment information provider.

“They see the U.S. property market slump as a good investment opportunity, believing that the U.S. market has almost hit the bottom and will turn around in the near future,” she added.

“Given that the U.S. market is expected to bottom out in the latter half or in the first half of next year at the latest, chances are that Koreans’ purchase of U.S. properties will increase further,” she said.

Lately, in the U.S. market, home prices are on the decline, while rents are up. “More and more parents whose children study in the U.S. are buying homes there as a long-term investment,” Hong said.

However, Koreans’ purchases of properties abroad fell sharply in July from a year earlier amid concerns over a global slowdown and a prolonged credit crisis in the U.S.

Overseas properties purchased by Korean individuals totaled $71 million last month, down from $126 million a year before, according to the report.

The average amount of money spent on each purchase was $460,000.

“The setback is due to concerns over a global slowdown and the U.S. subprime mortgage crisis that made Koreans shun investment in land and other properties abroad,” said an official at the finance ministry.

Individuals’ purchases amounted to $61 million, down from $121 million a year earlier, and purchases by corporate entities decreased from $46 million to $10 million over the same period.

By area, property purchases in Southeast Asian countries, such as Malaysia and the Philippines, totaled $12 million last month, while those in North America stood at $41 million.

Koreans spent a total of $25 million to purchase properties for residential purposes and $46 million for investment purposes.

Wealthy Look to US for Real Estate
by Kim Jae-kyoung | Korea Times